A Man’s Home Is His Licensed, Regulated, and Taxed Castle

If you have ever rented out a room in your home for the weekend to earn a little extra cash and make a new friend, you may be a criminal. If you have taken the effort to fix up an investment home and believe you can make a higher profit renting it to people on a short-term basis instead of in traditional, six month or year-long leases, you may be a criminal.

If you have ever left town for Mardi Gras or Jazz Fest to avoid the crowds and rented your house to someone for the festivities, you are a criminal.

While 84 percent of Americans disagree, that is the attitude of some hotel and bed and breakfast (B&B) owners and a few disgruntled neighbors of short-term rental properties in New Orleans.

On July 10, 2014, the New Orleans City Council voted to clarify the law making all residential rentals of less than 30 days (60 days in the French Quarter) illegal. This certainly isn’t the first time the City Council has found itself in the middle of a debate between supporters of newer, disruptive businesses and technologies that shake up the status quo, and those who argue that the newcomers are scofflaws who unfairly threaten the bottom line of existing businesses. In 2013 it was food trucks, earlier this summer Uber entered the conversation, and now it is short-term rentals, like those found on websites Airbnb and VRBO.

This time around, prohibitionists are displeased that owners of these “illegal” short-term rentals are able to avoid inspections by the city and do not pay the standard rental occupancy tax. Some neighbors complain that weekend renters make too much noise, litter, take up parking, and ruin the character of their neighborhoods.

This story should come as no surprise to regular readers of the Liberty in Action blog. San Francisco, “the city with the highest median rent rate” in the country, has banned short-term rentals despite having a problematic housing shortage. Issues have also come up in Grand Rapids, Mich., and New York City.

Nonetheless, in New Orleans, an outright ban is counterproductive and unnecessary to address the chief complaints because there are pre-existing legal mechanisms in place to handle problems perceived to arise from short-term rentals.

First, for those concerned with the safety of a property that isn’t subject to the same inspections as licensed hotels and B&Bs, the New Orleans Department of Code Enforcement is authorized to enforce code compliance on all buildings in the city. Second, neighbors worried about loud renters or litter can already use nuisance laws to address these issues through the District Attorney’s office.

Third, those worried about bed and breakfasts suffering from unfair competition because short-term rental owners don’t pay taxes should remember that only larger businesses with three or more units pay occupancy taxes, not all licensed B&Bs. In any event, these properties are still subject to regular property taxes. Fourth, street parking on public streets is just that, public. Therefore, a permanent resident of the neighborhood has no more of a claim to a spot than anyone else does.

Finally, attempting to define the character of a neighborhood and debating whether short-term rentals negatively impact it are certainly not immune to significant subjectivity. What, to some, are transient outsiders are, to others, an opportunity to make new friends and leave a good impression about the city to encourage future visits and spending in the community.

Nevertheless, the City Council seems to be open to future legalization and regulation measures. To that end, a group of property owners who rent property on a short-term basis have organized to draft an ordinance and have commissioned a study by the University of New Orleans to analyze the economic impact of short-term rentals. This is a better approach.

Leaving arguments aside as to what additional regulations, if any, are necessary, legalization of short-term rentals is the best decision for three reasons. Short-term rentals help fill properties that may otherwise sit empty, providing an additional incentive for property owners to renovate their property and return it to the housing stock and lessening opportunities for crime carried out against or within vacant homes. Entrepreneurs are able to create an additional stream of income by renting out rooms in their home. And an additional option is made available for visitors to New Orleans who prefer arrangements that aren’t provided by hotels and traditional B&Bs.

As shown above, the law already provides solutions to safety issues and unruly renters. Instead of a blanket ban to appease a vocal minority, New Orleans should legalize short-term rentals and allow residents and visitors alike to reap the many benefits while focusing enforcement efforts on the few bad apples by using existing nuisance laws.

By taking this approach, instead of uniformly branding entrepreneurs as criminals, negatively impacted neighbors can have potential problems addressed while still allowing entrepreneurial New Orleanians the ability to create a more robust housing market. Who wouldn’t enjoy more housing options, fewer vacant and blighted properties, and an additional income stream?

You can show your support for legalization by visiting this petition.

— Caleb Trotter
Caleb Trotter is a law student at Loyola University of New Orleans and a clerk at the Institute for Justice

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